See that's kind of my question: Why and how is there no single market rate? If you have truly worldwide remote work, that's what you would expect, right?

I don't know why that would be. Markets aren't intrinsic to how things work; they emerge if people are allowed to trade (including their time as an employee) according to a set of predefined rules.

So salaries might go up in one region if people want to do business there, for the sole reason that there is competition amongst employers for the employees there. They'll go down (or stay the same) if there's competition amongst employers for employers.

How does your example raise salaries all over the world to the most expensive salaries, worded in a way that also explains how those expensive salaries came about?

Not exactly. Because not all locations have the same value. Ie; harder to travel to, less infrastructure, more latency, working hours not lined up with certain market hours, etc. Two prior doing the same thing in entirely different places, aren’t always equal.